A new piece from Reuters details a bid to sell embargoed telecommunications equipment to Iran. More than 13 pages of the bid were stamped "Huawei confidential". But Huawei Technologies Comp. (SHE:002502) informed Reuters that it did not produce the document, but rather that the "bidding document" came from one of its "major local partners," Skycom Tech Co Ltd.

The bid offered an estimate €1.3M ($1.7M USD) worth of equipment to Mobile Telecommunication Comp. of Iran (MCI). The document references HP server, disk-arrays, and switches models, stating that they could be applied to providing service to the Iranian telecom's 20m+ pre-paid customers. The total bid was valued at €19.9M ($26.3M USD).

Huawei is the world's second largest telecommunications equipment maker. The company was founded by Ren Zhengfei, a former officer in China's People's Liberation Army (PLA). China enjoys a close trade relationship with Iran, buying much of its exported oil.

Ren Zhengfei, founder and CEO of Huawei, is a former PLA officer. [Image Source: CFP]

However, Huawei and other Chinese telecommunication integration firms are contractually forbidden from reselling electronics from U.S. companies like HP or Cisco to Iran -- doing so could jeopardize their relationship with their U.S. OEMs.

In a comment Huawei stated:

Huawei's business in Iran is in full compliance with all applicable laws and regulations including those of the U.N., U.S. and E.U. This commitment has been carried out and followed strictly by our company. Further, we also require our partners to follow the same commitment and strictly abide by the relevant laws and regulations.

In a followup comment, when asked whether Huawei sold the existing HP servers owned by MCI (referenced in the document), a spokesperson insisted it was not Huawei adding:

We would like to add that the existing hardware equipment belongs to the customer. Huawei does not have information on, or the authority to check the source of the customer's equipment.

Huawei insists it hasn't sold HP servers to MCI. [Image Source: HP]

HP issued a tersely worded statement, remarking:

HP has an extensive control system in place to ensure our partners and resellers comply with all legal and regulatory requirements involving system security, global trade and customer privacy and the company's relationship with Huawei is no different. HP's distribution contract terms prohibit the sale of HP products into Iran and require compliance with U.S. and other applicable export laws.

II. A Spotty Record

This is the second time in recent months that Reuters has reported on such an illicit sales attempt. In the previous report Reuters found that another Iranian partner of Huawei tried to illegally funnel antennas from U.S. antenna-maker CommScope Inc. to MTN Irancell, Iran's second largest mobile service provider. The deal was reportedly eventually rejected.

The Reuters report questions Huawei's ability to shift the blame to Skycom. It cites sources as stating that Skycom employees carry Huawei branded badges and that former employees put Huawei-Skycom on their resume. In other words, it sounds like Skycom is more than a mere partner to the Chinese firm.

U.S. officials are frustrated with the Huawei's apparent brazen disregard for its laws.
[Image Source: AFP]

A recent U.S. House of Representatives' Intelligence Committeedraft report [PDF] called for a ban on smartphones and telecommunications equipment from ZTE and Huawei. The report has not been finalized. Even if such a ban were put in place, the effect on either firm would likely be minimal, as their U.S. sales remain low. Both companies, however, have complained about the proposal, and have argued they did not trying to intentionally funnel forbidden electronics to Iran.

A separate White House report found no direct evidence that Huawei was spying on the U.S. for the Chinese government -- another concern. It did, however, state, that future spying could potentially occur, given Huawei's close relationship with the Chinese government.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA